Reason Foundation

Free to Choose

Why did America prosper while most of the world remains poor?

America's current struggles notwithstanding, life here is pretty good. We have a standard of living that's the envy of most of the world.

Why did that happen? Prosperity isn't the norm. Throughout history and throughout the world, poverty has been the norm. Most of the world still lives in dire poverty. Of the 6 billion people on earth, perhaps 1 billion have something close to our standard of living. Why did America prosper when most of the people of the world are still poor?

Milton Friedman taught me the answer. More than any other American, Friedman, who won the Nobel Prize in economics in 1976, clearly warned the world about the unintended consequences of big government.

"We've become increasingly dependent on government," said Friedman. "We've surrendered power to government; nobody has taken it from us. It's our doing. The results—monumental government spending, much of it wasted, little of it going to the people whom we would like to see helped."

That's from Friedman's PBS TV series Free to Choose, which aired 30 years ago and became the basis of his No. 1 bestseller by the same name.

The title says a lot. If we are free to make our own choices, we prosper. That was a new idea to many back then. At the time—when inflation and interest rates were in double digits and unemployment approached 10 percent—people thought a wise government could ensure economic growth, guarantee full employment, and eliminate poverty. Friedman explained that the opposite was true, that bigger government had brought us "burdensome taxes, high inflation, a welfare system under which neither those who receive help nor those who pay for it are satisfied. Trying to do good with other people's money simply has not worked."

No, it hasn't. So why, 30 years later, is America doing so much more of it?

Because people still have not learned Friedman's lesson.

Because of that, I give money to a charity that offers teachers free copies of some of my TV news videos that explain the benefits of free markets. The video most popular in high schools is one in which I ask students, "When so many nations remain poor, why did America become prosperous?" Many answer, "Because we have democracy." Yet India has democracy, and India has been poor for years. "India is overpopulated," they say. They don't know that India has the same population density as New Jersey.

Other students suggest that America prospered because of our natural resources. But Hong Kong has no natural resources. It's basically a rock. It is also more densely populated than India. Yet, in just 50 years, Hong Kong went from poverty to American levels of wealth.

How? In Free to Choose, Friedman explained that it was the free market. Overlooking the amazing Hong Kong skyline, he said: "This miracle hasn't been achieved by government action—by someone sitting in one of those tall buildings and telling people what to do. It's been achieved by allowing the market to work."

Walking down a crowded street, he added, "They are free to buy from whom they want, to sell to whom they want, to work for whom they want. Sometimes it looks like chaos, and so it is, but underneath it's highly organized by the impersonal forces of a free marketplace."

At the time of his series, India was a symbol of enlightened central planning.

"India has tremendous economic and human potential," Friedman commented. "The human tragedy is that in India that potential has been stifled by the straightjacket imposed by an all-wise and paternalistic government. Central planning has condemned India's masses to poverty and misery." What counted most for Friedman was that people should be free to try innovative ideas and succeed ... or fail.

"The free market enables people ... to trade with whomever they want; to buy in the cheapest market around the world; to sell in the dearest. ... (B)ut most important of all: If they fail, they bear the cost."

"Most important of all." It's clear what he would have thought of today's government bailouts.